January 2022 — What moved markets

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Introduction

Inflationary pressures, anticipated changes in interest rates, and regulatory concerns were the major factors that roiled the performance of global markets in the first month of the year, to the surprise of many analysts.

On January 12, the Labour Department reported that US inflation as measured by the Consumer Price Index (CPI) hit a 39-year high of 7% in December.

Monthly Inflation rate
Monthly Inflation rate (source: www.statista.com)

Higher shelter, used vehicles’, and food costs were the primary drivers. The high inflation strengthened expectations of a possible raise in interest rates beginning from March.

Also, on January 21st, Bloomberg reported that the Biden administration would in February most likely issue an executive order outlining policies to regulate digital assets.

With the persistent, supply chain disrupting COVID-19 variant, Omicron, the inflationary pressures do not look like easing anytime soon.

Nasdaq slumps by 8.99%; S&P posts worst performance since March 2020

January was a volatile month for Wall Street, especially for tech stocks. Nasdaq index almost had its worst year start since 2008 when it fell a whopping 9.89%. It ended the month with an 8.99% loss.

Similarly for the S&P500 index, with its 5.3% decline, the month was the worst since March 2020.

S&P500 and Nasdaq Index January 2022
S&P500 and Nasdaq Index January 2022

It seemed that in a long time, amidst the fear of a potential interest rate hike by the Fed, investors paused to reevaluate the lofty valuations of stocks.

However, on the last day of January, Tesla (TSLA) recorded a 10% gain after Credit Suisse rated it “outperform.” The upgrade came after the electric automaker announced its 2022 plans to scale production and develop a driverless vehicle tech (Full Self-Drive features).

Tesla’s gross margins and profitability were also impressive.

In addition, the stocks of Rivian (RIVN) and Lucid (LCID) and those of legacy automakers, Ford (F) and (GM) also traded up in the last trading session of the month.

In spite of the fears of a potential recession, the best optimism-fueling signs perhaps are that corporate profits have continued to soar and companies whose operations are most intricately linked to the economy such as General Electric (GE) and Wells Fargo (WFC) have managed to outperform the market.

Companies in the S&P 500, for instance, posted a 24% increase in gains over the previous year for the last quarter of 2021.

Crypto zones into a bearish mood

Since its November $69,000 all-time high, Bitcoin (BTC) has slumped by more than 46% to currently sit at $36, 942.

Bitcoin chart January 2022
Bitcoin chart January 2022

Altcoins fell too. But on January 31st, despite the month-long bearish mood in the cryptocurrency market, the Bahamas-based exchange, FTX, announced that it had managed to raise $400 million in a fresh round of funding, pushing its market valuation to $32 billion.

The company is now comparing favorably with industry giants such as Binance and Coinbase.

Conclusion

Inflation, anticipations of a Fed rate hike, and regulatory concerns were the most impactful factors on global markets in January.

The major stock market indices, from the Nasdaq to the S&P500, all posted negative returns for the first month of the year. And, after its long bullish run last year, the cryptocurrency market might have finally entered the cusp of a prolonged “winter” period.

Those factors, alongside the brewing US/NATO-Russia geopolitical tension, are expected to continue slowing global markets down at least in the mean time.

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https://www.art-invest.net/post/january-2022-what-moved-markets